In trading the stock exchange, no-one can predict the market with certainty. The price of stocks can go down, along with up. What is required is an exit strategy that will enable you to survive the bad stocks, and make a good profit on the good stocks.

The method that I have found to work the best is a trailing stop loss. For those who don’t know what a stop loss is, I shall explain briefly. A stop loss is an order for your stock broker to trade your shares if the cost dips to the level that you have specified.

The’re two ways of doing this. The easiest way is to prefer how much you are willing to lose as a percentage of your investment. A good rule is not to go under 10%. Work out the amount of the stock at this level and set that as your stop loss. As the price of the stock increases, keep moving the level of the stop up to keep the percentage gap the same. Some dealers supply a trailing stop loss service, where you let them know what percentage to set the loss at and they do it for you.

The second technique is slightly more involved, and comes from “Nicolas Darvas” in his book “How I made $2,000,000 in the Stock Market”. The markets tend to flow little by little. a stock on the rise will reach a peak, and then dip back off. It may do this several times at each stage. The idea is to follow the chart of the stock and see where the dips are the lowest, and set the stop loss just underneath them. A second part which Nicolas propounds is that when the stock breaks out of the sideways trend, to buy more of the stock, and when the stock starts going sideways again to move the stop loss up again to just under the lowest part of the dip.

Using the stop loss as an exit strategy, only works if you stick to it, and not lower it, thinking that the amount will go up again in a few days. In a few cases you will be right, but what usually happens is the cost keeps moving against you, and you loose even more money. As a secondary to this, the money still tied up in the first stock that is falling can’t be used for another trade.

Finally, a word of caution about applying the stop loss system to safeguard your capital. There are occasions when the markets undergoes a fast fall in price, the’re regulations about how far a price can fall in one-day. If it falls this maximum distance, it can bypass your stop loss, and you may be unable to trade. Although these situations are rare, it is advisable that you be aware of them. So that they are not a shock when they do happen to you.

Technorati Tags: exit strategy, stock exchange, stock market, stop-loss

Stocks are not constant. They increase, decrease and disappear. In fact, investing in the stock market is a risky endeavor not to be taken lightly. You name it– you may start out happy with the high standing of your stocks and after an hour or two turn sad because your stocks have somehow lowered down below their original value. They may actually plunge, slamming down to the lowest values fathomable. You may emerge feeling depressed that you’ve lost an investment that you’ve worked hard for and had much hope in. For this reason, investing in stocks can be both exhilarating and disconcerting.

To avoid such unsightly scenario, it would be best to do some research before investing all your hard earned savings on stocks. Stock investment is not for the faint hearted; it is for those smart individuals who knew how to manipulate the stock market for their advantage. These people know the importance of stock research and have spent a great deal of effort, time and even money just to come up with the best tactics that can help them in their quest for enormous stock returns.

The internet is a good venue for conducting research on stocks since you are able to access various online sources pertaining to stocks. The best thing about these sources is the fact that they are free. You might ask yourself why conducting stock research is critical. The answer is clear.

A stock research is conducted in order to know what stocks are favorable for investment and which stocks are to be avoided. It is also conducted to know the fluctuations in the stock market, this way businesses as well as private individuals are guided when to sell or when to buy additional stocks.

In addition, there are some free stock research providers online that offer their expertise by helping people reclaim their money from old bonds and stock certificates. Most of their clients are comprised of banks, estate and stock brokers, lawyers, and private individuals. Their services also include research on a company’s history and old stock shares dating centuries back.

There are also other free stock research providers that offer consultation services and at the same time assist members in choosing the stocks to invest on. These providers are stock investors themselves, what they actually do is to make the initial investment in a certain stock which they assess is profitable and then they let their members to also invest in the same stocks. If they gain their members will also gain. They religiously conduct stock researches in order to update their members when to sell, or when to buy additional stocks.

They also keep track of whatever changes in the stock market since they know that even a slight fluctuation in the stocks have significant effect on their investments as well as on the investments of their members—and the best thing about all of these services is that they are for free. If it’s your first time to invest in stocks it would be best to join such free stock research provider online. Keep in mind, time is critical since they accept only a limited amount of members.

Technorati Tags: stock market, stock research

Investing in penny stocks provides traders with the opportunity to dramatically increase their profits, however, it also provides an equal opportunity to lose your trading capital quickly. These 5 tips will help you lower the risk of one of the riskiest investment vehicles.

1. Penny Stocks are a penny for a reason.
While we all dream about investing in the next Microsoft or the next Home Depot, the truth is, the odds of you finding that once in a decade success story are slim. These companies are either starting out and purchased a shell company because it was cheaper than an IPO, or they simply do not have a business plan compelling enough to justify investment banker’s money for an IPO. This doesn’t make them a bad investment, but it should make you be realistic about the kind of company that you are investing in.

2. Trading Volumes
Look for a consistent high volume of shares being traded. Looking at the average volume can be misleading. If ABC trades 1 million shares today, and doesn’t trade for the rest of the week, the daily average will appear to be 200 000 shares. In order to get in and out at an acceptable rate of return, you need consistent volume. Also look at the number of trades per day. Is it 1 insider selling or buying? Liquidity should be the first thing to look at. If there is no volume, you will end up holding “dead money”, where the only way of selling shares is to dump at the bid, which will put more selling pressure, resulting in an even lower sell price.

3. Does the company know how to make a profit?
While its not unusual to see a start up company run at a loss, its important to look at why they are losing money. Is it manageable? Will they have to seek further financing (resulting in dilution of your shares) or will they have to seek a joint partnership that favors the other company?

If your company knows how to make a profit, the company can use that money to grow their business, which increases shareholder value. You have to do some research to find these companies, but when you do, you lower the risk of a loss of your capital, and increase the odds of a much higher return.

4. Have an entry and exit plan – and stick to it.
Penny stocks are volitile. They will quickly move up, and move down just as quickly. Remember, if you buy a stock at $0.10 and sell it at $0.12, that represents a 20% return on your investment. A 2 cent decline leaves you with a 20% loss. Many stocks trade in this range on a daily basis. If your investment capital is $10 000, a 20% loss is a $2000 loss. Do this 5 times and you’re out of money. Keep your stops close. If you get stopped out, move on to the next opportunity. The market is telling you something, and whether you want to admit it or not, its usually best to listen.

If your plan was to sell at $0.12 and it jumps to $0.13, either take the 30% gain, or better still, place your stop at $0.12. Lock in your profits while not capping the upside potential.

5. How did you find out about the stock?
Most people find out about penny stocks through a mailing list. There are many excellent penny stock newsletters, however, there are just as many who are pumping and dumping. They, along with insiders, will load up on shares, then begin to pump the company to unsuspecting newsletter subscribers. These subscribers buy while insiders are selling. Guess who wins here.

Not all newsletters are bad. Having worked in the industry for the last 8 years, I have seen my share of unscrupulous companies and promoters. Some are paid in shares, sometimes in restricted shares (an agreement whereby the shares cannot be sold for a predetermined period of time), others in cash.

How to spot the good companies from the bad? Simply subscribe, and track the investments. Was there a legitimate opportunity to make money? Do they have a track record of providing subscribers with great opportunities?  You’ll start to notice quickly if you have subscribed to a good newsletter or not.

One other tip I would offer to you is not to invest more than 20% of your overall portfolio in penny stocks. You are investing to make money and preserve capital to fight another battle. If you put too much of your capital at risk, you increase the odds of losing your capital. If that 20% grows, you’ll have more than enough money to make a healthy rate of return. Penny stocks are risky to begin with, why put your money more at risk?

Technorati Tags: investing, penny stocks, stock market

In trading the stock market, no-one has a crystal ball. The price of stocks can go down, as well as up. What is needed is an exit strategy that will enable you to survive the bad stocks, and make a good profit on the good stocks.  
The method that I have found to work the best is a trailing stop loss. For those who don’t know what a stop loss is, I shall explain briefly. A stop loss is an order for your stock broker to sell your shares if the price dips to the level that you have specified.

There are two ways of doing this. The simplest method is to decide on how much you are willing to lose as a percentage of your investment. A good rule is not to go less than 10%. Work out the price of the stock at this level and set that as your stop loss. As the price of the stock increases, keep moving the level of the stop up to keep the percentage gap the same. Some brokers offer a trailing stop loss service, where you tell them what percentage to set the loss at and they do it for you.

The second method is slightly more complicated, and comes from “Nicolas Darvas” in his book “How I made $2,000,000 in the Stock Market”. The markets tend to flow in stages. a stock on the rise will reach a peak, and then dip back down. It may do this several times at each stage. The idea is to follow the chart of the stock and see where the dips are the lowest, and set the stop loss just below them. A second part which Nicolas propounds is that when the stock breaks out of the sideways trend, to buy more of the stock, and when the stock starts going sideways again to move the stop loss up again to just below the lowest part of the dip.

Using the stop loss as an exit strategy, only works if you stick to it, and not lower it, thinking that the price will go up again in a few days. In a few cases you will be right, but what usually happens is the price keeps moving against you, and you loose even more money. As a secondary to this, the money still tied up in the first stock that is falling can’t be used on another trade.

Finally, a word of warning about using the stop loss system to protect your capital.  There are times when the markets undergoes a fast fall in price, there are regulations about how far a price can fall in one-day. If it falls this maximum distance, it can bypass your stop loss, and you may be unable to sell.  Although these situations are rare, it is better that you know about them.  So that they are not a shock when they do happen to you.

Technorati Tags: stock market

A market correction is a marvelous event, basically the opposite side of a rally, big or small. In theory, even technically are considered, corrections adjust equity prices to their real value or “support levels”. In reality, it’s much easier than that. Prices trend down because of speculator reactions to anticipations of news, speculator reactions to actual news, and investor profit taking. The two former “becauses” are more powerful than ever before because there is more “self directed” money out there than ever before. And therein lies the core of correctional beauty!  Mutual Fund unit holders rarely take profits but often take losses. Opportunities abound!

Here’s a list of ten things to do and/or to think about doing during corrections of any magnitude:

1. You should have adjusted your present Equity Allocation in to your goals and objectives. Defy the impulse to reduce your Asset allocation because you expect a further fall in stock prices. Not only you are making the mistake of attempting to time the market , which is (rather obviously) impossible, but also you are missing out on buying assets at low prices. Proper Asset Allocation has nothing to do with market expectations.

2. The beauty of correction is that, if you take a look at the past,  it is a proven buying opportunity. There has never been a correction that has not proven to be a buying opportunity, so start selecting a different group of high quality, dividend paying, NYSE companies as their move prices move down. I start my shopping spree at 20% below the 52-week high, and before few are left on the shelvesl.

3. Don’t hoard that “smart cash” you amassed in the last rally, and do not look back and get yourself perturbed as you might buy some issues too shortly. There are no crystal balls, and no place for hindsight in an investment plan.

4. Have a look at the future. Nope, you can not tell when the rally will come or how long it will last. If you’re purchasing quality stocks now ( as you definitely might be ) you’ll be able to love the rally even more than you did the last time as you take yet one more round of profits. Smiles broaden with each new realized gain, particularly when most folks are still head scratching’.

5. As (or if) the correction continues, buy more slowly as opposed to more quickly, and establish new positions incompletely. Hope for a short and steep decline, but prepare for a long one. There’s more to Shop at The Gap than meets the eye.

6. Your understanding and use of the Smart Cash concept has proven the wisdom of The Investor’s Creed. You should be out of cash while the market is still correcting. [It gets less and less scary each time.] As long your cash flow continues unabated, the change in market value is merely a perceptual issue.

7. Despite reduced prices, you notice that your invested funds is still growing, it is adviseable that you inspect your holdings for opportunities to average down on cost per share or to extend yield ( on fixed revenue instruments ). Inspect both basics and price, depend on your experience, and do not force the issue.

8. Identify new buying opportunities using a consistent set of rules, rally or correction. That way you will always know which of the two you are dealing with in spite of what the Wall Street propaganda mill spits out. Focus on value stocks; it’s just easier, as well as being less risky, and better for your peace of mind. Just think where you would be today had you heeded this advice years ago…

9. Examine your portfolio’s performance: with your asset allocation and investment objectives clearly in focus; in terms of market and interest rate cycles as opposed to calendar Quarters (never do that) and Years; and only with the use of the Working Capital Model, because it allows for your personal asset allocation. Remember, there is really no single index number to use for comparison purposes with a properly designed value portfolio.

10. Finally, ask your broker/advisor why your portfolio has not yet surpassed the levels it boasted five years ago. If it has, say thank you and continue with what you’ve been doing. This one is like golf, if you claim a better score than the reality, you’ll eventually lose money.

11. One more thought to consider. So long as everything is down, there is nothing to worry about.

Corrections (of all types) will vary in depth and duration, and both characteristics are clearly visible only in institutional grade rear view mirrors. The short and deep ones are most lovable (kind of like men, I’m told); the long and slow ones are more difficult to deal with. Most corrections are “45s” (August and September, ’05), and difficult to take advantage of with Mutual Funds. But amid all of this uncertainty, there is one indisputable fact: there has never been a correction that has not succumbed to the next rally… its more popular flip side. So smile through the hum drum Everydays of the correction, you just might meet Peggy Sue tomorrow.

Technorati Tags: asset allocation, invest, stock market, value stocks, working capital

With stock trading online somebody can have constant access to the market. Hop on your computer and bring out out the websites that can help you with this process. It doesn’t matter if you’re looking to throw away a little or invest a lot, there is something just waiting for you. The great thing about the Internet is the information. You can find an abundance of trading tips and truth about the stock market for free. This way when you commence stock trading online, you won’t be in the dark.

A few living back, my best friend hopped on the stock market bandwagon, and purchased some shares. When he began this little venture, he purchased on the recommendation of a partner who had been trading for years. After selling a number of shares at 10 bucks a pop, he was keen to go. It wasn’t long before the shares had inceased to 60 bucks a pop. He took the innocent road and sold immediately. I think that this was a astute decision. He made the currency and puzzled nothing. With stock trading online, shrewd when to fold is key. Just like with gambling, you have to know when to currency out. Make some money, but don’t get greedy. Before you know it, the shares have dropped below your purchase price. Stock trading online is a amazing way to veer a profit and make that added cash.

Before you skip online and shy away investing, bring out out some websites for facts and numbers and pointers on the challenge of stock trading. A better understanding of the matter will pay off at the end.

Technorati Tags: constant access with stock trading on internet, stock market, stock trading internet, stock trading online

To avoid such unsightly scenario, it would be best to do some research before investing all your hard earned savings on stocks. Stock investment is not for the faint hearted; it is for those smart individuals who knew how to manipulate the stock market for their advantage. These people know the importance of stock research and have spent a great deal of effort, time and even money just to come up with the best tactics that can help them in their quest for enormous stock returns.

The internet is a good venue for conducting research on stocks since you are able to access various online sources pertaining to stocks. The best thing about these sources is the fact that they are free. You might ask yourself why conducting stock research is critical. The answer is clear.

A stock research is conducted in order to know what stocks are favorable for investment and which stocks are to be avoided. It is also conducted to know the fluctuations in the stock market, this way businesses as well as private individuals are guided when to sell or when to buy additional stocks.

In addition, there are some free stock research providers online that offer their expertise by helping people reclaim their money from old bonds and stock certificates. Most of their clients are comprised of banks, estate and stock brokers, lawyers, and private individuals. Their services also include research on a company’s history and old stock shares dating centuries back.

There are also other free stock research providers that offer consultation services and at the same time assist members in choosing the stocks to invest on. These providers are stock investors themselves, what they actually do is to make the initial investment in a certain stock which they assess is profitable and then they let their members to also invest in the same stocks. If they gain their members will also gain. They religiously conduct stock researches in order to update their members when to sell, or when to buy additional stocks.

They also keep track of whatever changes in the stock market since they know that even a slight fluctuation in the stocks have significant effect on their investments as well as on the investments of their members—and the best thing about all of these services is that they are for free. If it’s your first time to invest in stocks it would be best to join such free stock research provider online. Keep in mind, time is critical since they accept only a limited amount of members.

Technorati Tags: stock, stock market

A Winning Approach to Trading in the Stock Market:

Many traders lose simply out of ignorance. They base their trades on hunches, news, or tips from friends, and do not define specific risk and profit objectives before placing trades.

Others have the merit of educating themselves but fall victims of their emotions. They hold on to losing positions hoping they will turn into winners and sell winners by fear of losing a small gain. They overtrade to fulfill a need for action or by fear of missing out.

The consistent winners follow a winning approach:      

They have a strategy to enter and exit trades

They use good money management 
They take consistent actions, they follow a trading plan 
They keep good records so they can review their actions 

They avoid overtrading 
They have a winning attitude 
A strategy to enter and exit trades
You need to a strategy to put the odds in your favor for each trade you take. Your  strategyshould be as objective as possible and include the following elements:
      
Entry: conditions required before you can enter a trade – may include technical analysis, fundamental analysis, or both. 
      
Initial stop loss: price at which you will close the entire position if it does not go in your favor. The risk per share is the difference between the entry price and the initial stop.
  
Initial price objective: price at which you will take some or all profits if the trade goes in your favor.
Trade management: set of rules that dictates your actions while a trade is opened. It may include trailing stops, closing position, etc.

For every action you take, the reason should be clearly described in your strategy. 

Money management rules to keep losses small
The goal of money management is to ensure your survival by avoiding risks that could take you out of business. Your money management rules should include the following:

Maximum amount at risk for each trade. The different between your entry price and your initial stop loss is your risk per share. Your maximum amount at risk for each trade determines the share size.
Maximum amount at risk for all your opened positions. 
Maximum daily and weekly amount lost before you stop trading – avoid trying to trade your way out of a hole after a loosing streaks. 
During your learning phase, your goal should be to survive, not to make money. Start with low limits and raise them as you become a consistent winner otherwise you will simply go broke faster.

 
Good record keeping
Although the process of gaining experience cannot be rushed, it can be made much more efficient by keeping good records of your actions. Good records will allow you to: Review your actions at the end of each day to make sure you followed you strategy, not your emotions. 
Learn from your losses – they cost you money, make sure you get the education in return. You should also keep a journal of your observations.
A trading plan to keep emotions out of  your decisions.
During trading hours, emotions will turn smart people into idiots. Therefore you have to avoid having to make decisions during those hours. This requires a detailed trading plan that includes your strategy and your money management rules. 
For every action you take during trading hours, the reason should not be greed or fear. The reason should be because it is in the plan. With a good plan, your task becomes one of patience and discipline.
You have to follow the plan without exception. Any valid reason for an exception – for example, correcting an oversight – should become part of the plan.

Overtrading
Sometimes the best thing to do is to do nothing. Not trading on those bad days is key to becoming a consistent winner; in some situations it is very tempting to overtrade: 
       If you trade to fulfill a need for action, to relieve boredom
       If you can’t find the proper setup but can’t wait
       If you fear you are missing out on a great trade or on a great market
       If you want to make up for losses (revenge)
       If you trade to feel like you are working instead of sitting around. Trading involves a  lot         of work other than the actual buying and selling. 
      
      You should not trade under the following conditions: 
      
       You are not following your trading plan 
       You have reached your daily or weekly maximum loss 
       You are sick or very tired
       You are very emotional (upset, pressured to make money, self-esteem destroyed) 
       You are using new tools you are not completely familiar with 
       You need time to work on your trading plans
           
A winning attitude
Losing traders look for a “sure thing”, hang on hope, and avoid accepting small losses. Their trading is based on emotions. You must treat trading as a probability game in which you do not need to know what is going to happen next in order to make money. All you need to know is that the odds are in your favor before you put a trade. 
If you believe in your edge, which is you believe that the odds in your favor for each trade you enter, then you should have no expectation other than something will happen. 
Your attitude will have a direct influence on your trading results:Take responsibility for all your actions; do not blame the market or world events.  
            
Trade to trade well and for the love of trading, not to trade often and not for the money. The money will come as a result of trading well. 
 
Do not be influenced by the opinions of others. Reach your own decisions and follow them.  
Never think that taking money from the market is easy and never assume that you know enough.
Have no particular expectation when you place a trade because you know that anything can happen. 

Do not try to guess the future; trading is a game of probabilities. 
Use your head and stay calm; do not get excited or depressed. 
Handle trading as a serious intellectual pursuit. 
Do not count how much money you have made or lost while you are in a trade – focus on trading well.

Technorati Tags: day trading, day trading courses, online trading, stock market, stock trading, swing trading, trading logs, trading software, trading systems

They have a strategy to enter and exit trades         They use good money management.          

They take consistent actions, they follow a trading.

They keep good records so they can review their actions.          

They avoid overtrading        

They have a winning attitude A strategy to enter and exit trades. You need to have a strategy to put the odds in your favor for each trade you take. Your strategyshould be as objective as possible and include the following elements:      

Entry: conditions required before you can enter a trade – may include technical analysis, fundamental analysis, or both.       

Initial stop loss: price at which you will close the entire position if it does not go in your favor. The risk per share is the difference between the entry price and the initial stop.  

Initial price objective: price at which you will take some or all profits if the trade goes in your favor.

Trade management: set of rules that dictates your actions while a trade is opened. It may include trailing stops, closing position, etc.

For every action you take, the reason should be clearly described in your strategy. 

Money management rules to keep losses smallThe goal of money management is to ensure your survival by avoiding risks that could take you out of business.

Your money management rules should include the following:

Maximum amount at risk for each trade.

The different between your entry price and your initial stop loss is your risk per share. Your maximum amount at risk for each trade determines the share size.

Maximum amount at risk for all your opened positions. Maximum daily and weekly amount lost before you stop trading – avoid trying to trade your way out of a hole after a loosing streak. 

During your learning phase, your goal should be to survive, not to make money. Start with low limits and raise them as you become a consistent winner otherwise you will simply go broke faster. 

Good record keeping.

Although the process of gaining experience cannot be rushed, it can be made much more efficient by keeping good records of your actions.

Good records will allow you to: Review your actions at the end of each day to make sure you followed you strategy, not your emotions. 

Learn from your losses – they cost you money, make sure you get the education in return. You should also keep a journal of your observations.

A trading plan to keep emotions out of  your decisions. During trading hours, emotions will turn smart people into idiots.

Therefore you have to avoid having to make decisions during those hours.

This requires a detailed trading plan that includes your strategy and your money management rules. 

For every action you take during trading hours, the reason should not be greed or fear.

The reason should be because it is in the plan. With a good plan, your task becomes one of patience and discipline.You have to follow the plan without exception.

Any valid reason for an exception – for example, correcting an oversight – should become part of the plan.OvertradingSometimes the best thing to do is to do nothing.

Not trading on those bad days is key to becoming a consistent winner; in some situations it is very tempting to overtrade:       

If you trade to fulfill a need for action, to relieve boredom.      

If you can’t find the proper setup but can’t wait.       

If you fear you are missing out on a great trade or on a great market.      

If you want to make up for losses (revenge).      

If you trade to feel like you are working instead of sitting around.

Trading involves a lot work other than the actual buying and selling.            

You should not trade under the following conditions:             

You are not following my trading plan.        

You have reached your daily or weekly maximum loss.        

You are sick or very tired.      

You are very emotional (upset, pressured to make money, self-esteem destroyed).        

You are using new tools you are not completely familiar with.        

You need time to work on your trading plans.          

A winning attitude

Losing traders look for a “sure thing”, hang on hope, and avoid accepting small losses. Their trading is based on emotions. You must treat trading as a probability game in which you do not need to know what is going to happen next in order to make money. All you need to know is that the odds are in your favor before you put a trade. If you believe in your edge, which is you believe that the odds are in your favor for each trade you enter, then you should have no expectation other than something will happen.

Your attitude will have a direct influence on your trading results:

Take responsibility for all your actions; do not blame the market or world events.              

Trade to trade well and for the love of trading, not to trade often and not for the money. The money will come as a result of trading well.  

Do not be influenced by the opinions of others. Reach your own decisions and follow them.  

Never think that taking money from the market is easy and never assume that you know enough.

Have no particular expectation when you place a trade because you know that anything can happen. 

Do not try to guess the future; trading is a game of probabilities. 

Use your head and stay calm; do not get excited or depressed. Handle trading as a serious intellectual pursuit. 

Do not count how much money you have made or lost while you are in a trade – focus on trading well.

Technorati Tags: day trading, day trading courses, online trading, stock market, stock trading, swing trading, trading logs, trading software, trading systems